OTTAWA — When provincial finance ministers meet Monday with their federal counterpart, routine gripes over equalization payments and pension reform will be pushed back by a much bigger concern — plunging global oil prices and the impact on Canada, particularly in the oil patch.

The Conservative government has already warned that crude prices — now trading below US$60 a barrel, more than a five-year low — will significantly cut into growth next year and beyond.

With many oil companies putting investment plans on ice, there are worries a freeze on spending will also cut deep into the fiscal books of Alberta, the country’s largest oil producer, as well as those in Saskatchewan and Newfoundland and Labrador.

“The biggest hit is actually on the income front. . . . Nominal GDP, which is the total income in the economy, is going to drop very dramatically,” said Craig Alexander, chief economist at TD Economics.

“The pace of growth in Alberta is going to drop to a low single-digit . . . because there’s going to be this huge swing in the terms of trade for provinces like Alberta and Newfoundland,” he added.

“It can cause them to constrain their spending growth and that can have a knock-on effect in terms of job growth in the public sector. Scaling back investment intentions will naturally have an impact on sectors that were going to be involved in that investment activity.”

Not surprisingly, perhaps, Alberta Finance Minister Robin Campbell is taking a pass on the one-day meeting in Ottawa —the first to be chaired by Joe Oliver, the federal minister — to focus on the province’s upcoming budget, expected next spring.

“Alberta has started to undertake measures to reduce government spending and work is underway to find savings in government,” said Kevin Zahara, Mr. Campbell’s press secretary.

“This is not business as usual in the province and we will be very disciplined and prudent in our spending in this low-price environment.”

In his Nov. 12 economic and fiscal update, Mr. Oliver projected a surplus of $1.9 billion for next year — on top of a $3-billion contingency fund — and that would rise to $6.8 billion by 2018-19.

Mr. Oliver said the drop in oil prices could cut about $3 billion off nominal growth in Canada’s economy this year — and by as much as $16-billion annually through 2019. That would shrink Ottawa’s budget balance by $500 million this year and by $2.5 billion a year over the next four years.

Those forecasts were based on oil trading around US$70 a barrel, with the government using a blended price between what Canadian oil has been selling and that of Brent crude, the global North Sea benchmark. At that time, overall global crude prices were trading around US$77.

Bank of Canada governor Stephen Poloz this week acknowledged he anticipates lower oil prices will knock about 0.3% off gross domestic product in 2014, but longer-range estimates were not provided.

For Alberta, the government calculates that for every dollar lopped from crude prices, revenues fall by about $215 million. “The fall in oil prices is having a significant impact on provincial revenue for the government of Alberta,” said Mr. Zahara.

“In this low-price environment,” he said, “there will be a budget shortfall of $6 billion to $7 billion in the next fiscal year.”

“Even with the fiscal challenges, our economy remains strong with investments still being made in various sectors including oil and gas,” Mr. Zahara said. “Forestry, manufacturing and agriculture are all doing well. We still expect growth next year and are in a good position to deal with this situation.”

So far, many economists agree the overall impact of low-for-longer crude price will be mitigated by growth in other sectors and in other regions of the country, where low oil costs will help boost output — as it will in the United States — an encourage consumer spending.

“For the global economy, it’s a very positive supply shock,” said Charles St-Arnaud, an economist at Nomura Securities, but “that depends are where you are and what you do.”

“If you’re an oil producer or you have a job in the oil industry, you’re probably getting very, very worried. But if you’re a manufacturer in Ontario that has nothing to do with oil, then great. Transportation costs will go down. The dollar is going down. So, if I’m exporting to the U.S., I’m happy.”

At the same time, there appears to be little risk of the financial sector taking a hit, as diversified lenders will find new customers elsewhere.

“Banks are constantly assessing risks and challenges to the economy and how these may impact on their business,” said Terry Campbell, president of the Canadian Bankers Association.

“A strength of our banks is their diversification of business both geographically and across different sectors of the economy.”

As for interest rates, most forecasters still see the Bank of Canada holding the line until U.S. monetary policymakers make the first move — still expected to be up — in early or mid-2015.

The Bank of Canada has held its trendsetting lending level at 1% since September 2010. Some economists have suggested the drop in oil prices could convince policymakers to lower that already near-record low rate to help prime the economy.

“We have to remember that the objective of the Bank of Canada is not growth stabilization. It’s inflation targeting,” said Mr. St-Arnaud, who has worked at the central bank and the Finance Department.

“Core inflation is now 2.4%. It’s hard to justify to cut rate when your inflation is higher than [the bank’s target of] 2%.”

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